Anhui Deli Household Glass Co., Ltd. (SZSE:002571) Stock Rockets 31% But Many Are Still Ignoring The Company

Those holding Anhui Deli Household Glass Co., Ltd. (SZSE:002571) shares would be relieved that the share price has rebounded 31% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 36% over that time.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Anhui Deli Household Glass' P/S ratio of 1.4x, since the median price-to-sales (or "P/S") ratio for the Consumer Durables industry in China is also close to 1.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for Anhui Deli Household Glass

What Does Anhui Deli Household Glass' P/S Mean For Shareholders?

Revenue has risen firmly for Anhui Deli Household Glass recently, which is pleasing to see. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. Those who are bullish on Anhui Deli Household Glass will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Anhui Deli Household Glass will help you shine a light on its historical performance.

How Is Anhui Deli Household Glass' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Anhui Deli Household Glass' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. Pleasingly, revenue has also lifted 58% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 12% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Anhui Deli Household Glass is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On Anhui Deli Household Glass' P/S

Its shares have lifted substantially and now Anhui Deli Household Glass' P/S is back within range of the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

To our surprise, Anhui Deli Household Glass revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

It is also worth noting that we have found 2 warning signs for Anhui Deli Household Glass (1 is significant!) that you need to take into consideration.

If you're unsure about the strength of Anhui Deli Household Glass' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.